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Saptember 6, 1990
HONORABLE CIrV COUNCIL
Palo Alto, California
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Attention: Finance and Public Works Committee
GlJI!! LUI! OVEIUIIDE
Members of the Council:
• eport: I_ Bri'f
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This re~rt informs council of the status of the city's budqet in
relation to the constitutional appropriations limit established in
Article 13B (Proposition 4 [Gann]); recommends that the council
determine the appropriate election date to place a ballot measure
before the vot.ers; and provides information on the proposed
sched,ule for the ballot initiative" should the Council choose to
place the_ ~easure on the ballot in March 1991.
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BackqrouDiS
Article 13B limits the amount of tax revenues ,,*hich may be
approprIated by qovernmental entities. A city is permitted to
change its appropriations limit if authorized by a vote of the
electors. Such authorization may not exceed 4 years. In November
1987 the citiEens of Palo Alto approved an override to the cityF s
Proposition ,. (Gann) appropriati®s limit in conjunction with
a~oyal of a utility users tax. Measure C stipulated that the
appropriations limit would be cbanged by increasing the 1981-88
base amount by $545 .illion. That revised base amount ~as used to
calculate the appropriations limit for the ensuing three years#
through 1990/91.
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Diseu •• lop
In June 1990, the voters amended the California Constitution via
Proposition 111 t.o change the methodology for calculating the
appropriations limit. cities are nov able to adjust their limits
annually by either the change in population within the city QX by
the percentage change in population for the entire county~ This
cha.1lge qive.s Palo. Alto almost $2 1II111io.n in additional -room
between appropriations subject to the Ii_it and thg City's
Proposition 4 li.it in both 1~90-91 and 1991-92. In spite of this
additional leeway-, the City will be $5-00,0<0'0 over its Gann limit in
1991-92, when the $5.5 million override authority expires. As was
discussed with the Council durinq the 1990-92 budget process,
projected expenditures, and thus the appropriations subject to. the
limit in the budget tor fiscal year 1991-92, do not contain any of
the expenditures which will be proposed as a part of the CUbberley
Master Plan. Approval of these additional appropriations .. ill
exacerbate the cityrs problem vis-a-vis its Gann limit.
The following: chart shows the status of our current Gann limit. As
can be seen, the City has approximately $4.7 million of ·Creeboard
for the current year.. '!'he chart also shows the estimated Ganon
limit vis a vis estimated appropriations subject to limit (or 1991-
92. ~caQse tha 19B7 base year reverts to its 'pre-Measure C level,
the 199.1-92 appropriations subject to the limit will exceed the
City's Proposition. liait by approxi~ately $SCO,OOO. The 1991-92
budget could be reducecJ by $5-0.0 .. 0·0.0 by cutting back on the special
sidewalk repair program, thereby brinqInq us within the limit for
1991-92.
However .. as noted above, the bodqet does not contain any proposed
expenditures tor the remodeling and repair of Cubberley.. This 'Was
done purposely since the Master Plan process is sti 11 underway and
Council bas made no decisions as to the size or scope of the
CUbberley project. Any 'Work on CUbberley will drive our appropria
tions substantially beyond the Gann lillit margin. Thus .. if Council
intends to authori.ze 'Work on the CUbberley project for 1991-92. it
will be necessary to return to the voters and request a re
authorization of the Gann limit ·override w • That re-authorization
must be in place prior to appropriating any funds for Euch ~ork ..
in summary, we will exceed our Gann limit next year (1991-92J.
However. t.he budget could be reduced to accommodate the problem by
scalinq back the special sidewalk replacement program.. Implementa
tion of the CUbberley Master Plan.. in whatever forD, will also
cause us to exceed the Gann limit. That program is so large that
no reasonable budget adjustments \lill bring 'Us back within the
li.it. Consequently, if we are to implement the CUbberley Master
Plan, an election should be held in March 1991 or November 1991.
Council should determine which of the two dates is more appropri
ate.
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Revised Gann Limit*
Appropriations Subj. to Limit
Under Li.it
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1990-91
$51,6510,,000
4Ei,951,O(tO
$ 4,737 1 00'0
1991-92
$47.874,,532
Appropriations SUbj. to Limit •••
OVe.r Limit
48 .338 .009
$463,468
• Uses change in santa Clara County population instead of Palo
Alto
•• Assumes 4.5' CPI increase and 1.2\ change in sec population
••• Does not include implementation of Cubberley Master Plan
amouR" 0 f OVerr ide
projections show that the escalated costs of the School lease plus
increaslnq construction costs vill require a Gann limit override of
$7.0 .illion by 1994-95 (rour-year limit on Gann override).
utility user tax receipts will track these increases.. and no
increase in tax rate yill be needed.
Ii the voters re-authorize a Gann limit override" budget plans will
proceed as previously approvea by council. No new or additional
taxes will be authorized l but Council will retain the authority to
spend thosa funds alrea~y coming into the City treasury. Discus
sion reqardinq the CUbberley Master Plan can remain on scbedule and
Council can determine tha size ... scope and timinq of improvements to
Cubberley in accordance with pre~io~sly discussed plans. If the
voters do not re-authorize the Gann lillit override .. council wi 11 be
required to make several important policy decisions in order to
assure that our ~tinuinq appropriations do not exceed the Gann
Ii.it. The options under these circumstances are outlined belo~.
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QgQ.agu.ne •• at Voter 'allure to Approv. Qy.rr14t
09tlop 1:
The city 'Would be entitled... under the terss of the Lease and
covenant No.t to Develop with the Palo Alto unified SChool District"
to ter.inate the lease by giving a six-month vritten notice within
30 days of the unsuccessful election. Cubberley SChool would then
be -returned-to the District, and the City 'Would have no fUrther
Obligation under the lease.
Oiscontinuinq tile lease will Zlean the city viII not pursue plans to
develop the CUbberleylCommunity center; will release the ChIone"
Garland" Greendell, Jane Lathrop Stanford" and Jordan SChool sites
from the Covenant. Not to Develop; and 'Will discontinue pa:r.nents for
11 day care cent;ers located at various scbool sites. At the
current time, 14 full-time staff positions and .5e temporary
positions are assigned to the CUbberley project. Tbey include C
positions in Public Works" 9.58 positions in Community Services and
1 posItion in Finance. It was understood ~h£n these positions were
approved by the council .. that they would continue only as long as
the lease of CUbberley was in effect.
In addition.. the capital improvement project for streets and
sidewalks would be scaled back by $1 million per year. In both
fiscal years 1988-89 and 1989-90 ... Council approved $85-0 .. 0000 in
additional funding for sidewalks which .. combined with the $20.0,,0'0'0
in the Public Works Operations Division budget... resulted in
repair/replacement of 2000 .. 00'0 5ql.Oare feet of sidewalk in each year.
In 1990-91 and 1991-92, Council has approved. '$350 .. 0,00 additIonal
fundi~ which, combined with the $20',O~OOO in the Operations
Oivision budget ... would result in 100.~OO square feet of sidewalk
replacement. If funding is reduced to $200,OoGO, only 40,,00'0 square
teet would be replaced .. which would not keep up with what is
annually added to the backlog.
A si.ilar impact could be anticipated in street replacement.
Public Works estimates that it requires $90~,OOO per year just to
keep up with current street deterioration due to aging. In
addi'tion" there is a '$3 million backlog in identified street
resurfacinq. The current .funding for street resurfacing ('$6~5"O'OIO
in q8S 'tax ~Ies and $650,,000 in utility users tax funding) allows
Public Works to keep up yith annual onqoinq deterioration" while
additionally reducing the backlog by about $415,,000 per year. At
the current funding level" the backlog is anticipated to be
eli.inated in about 1 to 8 years.. If only qas tax monies are
available for street resurfacing, the backlog will never be
eliminated .. and will actually qro.-by about $235,,0')0 per year .. The
problem would become more acute in future years... as gas tax funds
are anticipated to be required fcr other purposes" such as the
Major Xntersection Improvements capital improvement project in the
1991-92 capital Improvement PrograD.
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In eftect6 this ~tlon reduces the need tor the utility user tax
since the items 11sted above are currently funded by that source.
councIl would then have to d~cide on a new utility user tax rate,
if any.
Optio. 2:
council could terminate the ex:istill9 aqreement with tbe SChool
Di.trict and attempt to neqotiate a more restrictlve one~ For
example 6 by discontinuing the $1 .illion per year program :for
streets and sidewalks, Council could reallocate those funds to a
new School Dis~rict agreement. That agreement might allow child
care to continue or preserve the Covenant Not To Develop on
elementary school sites. In short, the money could be redirected
to other purposes if council chose to cSo so and since those funds
are already appropriated~ they fall within the existing Gann limit
calculations.. As in the previous option, Council would need to
establish a new utility user tax rate commensurate with the new
level of appropriations.
OPtion J:
CUbberley is now in operation albeit at a minimal level~ Kajor
repairs to the facility are needed and, as reported in the site
condition survey complete~ by CSS Associates in August 1989, these
amount to approximately $3 .il11~. (This amount oCOvers only
repairs needed to bring the buildings up to code and make them
permanently habitable. It does not: inclooe any remodeling or
modifications requested by community groups in the forthcoming
)[aster Plan proposal.) It 'Would be possible to retain the eXisting
lease with the SChool District; delete all -Master Plan-improve
ments; perform only code-required repairs ($3 million]; and operate
CUbberley as it no~ stands~ This would require eliainatinq the
sidewalk/street repair program outlined in Option 1 above in order
to find the $3 million necessary to do the code repairs. Agai~1
Council ~ould have to make a chanqe in the utility tax levy.
!lone of these decisions need to be :made at this time. It is
necessary. however, that steps be taken to place the re-authoriza
tion issue before the voters in either March 1991 or November 1991.
sp,eia) Blection Calendar
The City Clerk has prepar~d a scbedule for a special election for
a Gann limit override (Attachment 1), if it ~ere to be held in
March 1991. The scbed·ule calls for the Coun<:il to approve a
-Resolution Calling for a SpeCial Election-in November 1990, and
a special election in Karch 1991.
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Staff recommendS that Council deter.in. vhethe~ t~ pl~ce A ~S~5~~*
on the Karch 1991 Qr November 1991 ballQt requestin9 that vQte~$
.uthOri~e a $1.0 .l11ion '~r ••• e in the .pprcp~i.tlQn$ Ii_it 'O~
the Cit1 of Palo Alto tor fiocal y.a~& 1991-~2 throuqh 19~f-~5.
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Coaad""Qne CLaa4lyfordl;':"tvfik ~u.tiaa~ I!lc-Sub Clara Co~ty:s.~
d ~ _ k,pmm-r:I VOle'll., I"tIi'"CIS'IlllI COUOiJ4atioD r:1 Marth 5, m1
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[)iJa:c ~ • (lMI a., II) file wri'ttu 'T'IIKlIQ: b: ar Ip.i.IIa: -.asun:)
itdtul1ll AqmrIt:.DtI • (la:I "-111:1 &. ~ cr.i1Mtn' relHIttal ~DIII)
.New YCUi 0., (OJ!W ClaKd)
ltUrtin t..1'!!u Jtmt'l ~tnlJ&J to!]' Ball 00K4)
Political k.efoml Ad • Campaip DiKfCIWR • 1a" hc-ElcC1ioa SUI=etI! [>...e -
p~ ~ iI.JamaJ:r 1. 1991 rhtoup hnlWJ' 19, 1!i191
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Absc:lIt Vccer ~ta5oa [doles)
'ubTtc:atioa r:I CDnlriblOtioNI and CoIItWlltoa.
CaIl"'aSl of ElecIioa ~ur.II IIJ City Coo,lId
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